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Affording the Future? The role of cost effectiveness thresholds in determining NHS patient access to high quality care in the post-Brexit era

UCL School of Pharmacy

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a Summary 

• Worldwide, life expectancy at birth has increased by 30 years in the last 100 years. New medicines and vaccines, combined with other health care advances, have accounted for approaching half this progress. Continuing advances in the prevention and treatment of cancers and the neurological and musculoskeletal diseases (as well as in controlling continuing infectious threats) could ensure that virtually everyone will in the second half this century be able to live in good health into their 80s, baring relatively rare exceptions. But there are concerns about the affordability of new treatments, and whether or not societies will choose to fund the research needed to develop them or afford the costs of their universal supply.

• In cost effectiveness analysis (CEA) cost effectiveness thresholds can define the maximum payable for an additional Quality Adjusted Life Year (QALY). Recent evidence indicates that NICE normally regards ‘new QALY’ costs (also referred to as Incremental Cost Effectiveness Ratio or ICER values) of up to £30-£40,000 as providing sufficient ‘value for money’ for NHS patient use. This threshold can vary but above it treatments are not usually recommended. For comparison, nursing home care for people living with a limited quality of life often costs over £50,000 a year, while British public ‘willingness to pay’ based estimates indicate an incremental QALY value of around £60,000. • Calculating QALY values is by no means an exact science, and there is no agreed way of calculating cost effectiveness thresholds. NICE has a Highly Specialised Technologies (HST) programme that does not depend on ‘cost per QALY’ estimates. The logic of this partly relates to the fact that while the costs of developing ‘ultraorphan’ treatments can be close to those for commonly used products the volume of QALYs generated will, given limited patient numbers, be much lower. But the HST approach has been used to evaluate only a few very rarely used treatments. • The principle that cost effectiveness thresholds should vary according to the context in which new QALYs are being generated deserves wider recognition. It is not in the public’s interests to expect the prices of all innovative therapies to fall within ‘one size fits all’ parameters. Rigid approaches deprive people of treatments that are in budgetary impact terms affordable, especially when total pharmaceutical outlays can be limited by other means. The Pharmaceutical Regulation Scheme (PPRS) caps the cost of all medicines supplied to the NHS under its terms.

• The use of narrowly defined measures of value combined with relatively low cost effectiveness thresholds can conflict with the NHS’ duty to provide good care for everyone. It sometimes leads to people feeling that they have to beg for treatments that their doctors believe could benefit them. Well-structured policies could and should avoid such service failings, not least because once the costs of developing and licensing new treatments have been incurred the macro-economic savings derived from not supplying them to NHS patients can be much smaller than is often assumed. International experience indicates that a more humane system would be affordable.

• The proportion of NHS resources spent on pharmaceuticals has been around 10 per cent for approaching 50 years. The economics of areas like anti-cancer treatment supply are complicated by the fact that such medicines are normally first used alone to treat late stage disease. Yet their optimum ‘cost per QALY’ value is likely to stem from using them with other drugs in earlier stage therapy. This can be why novel medicines are dismissed as ‘merely adding weeks to the end of life’. Research based companies need to generate income relatively soon in the life cycles of innovative products, while intellectual property rights still apply. Yet often their products’ full value only becomes apparent after they become low cost generic products. This tension often underlies pricing concerns.

• Some researchers have argued that the incremental cost effectiveness threshold employed by NICE should be cut to below £15,000 per QALY. Others reject such recommendations as being based on inadequate data, Embargo – Not for publication before 00.01 hours Wednesday 16 November 2016. 2 Affording the future? poorly interpreted. Even if were the case that ‘new QALYs’ on average cost the NHS £15,000, it would be in the public interest to allocate above average levels of investment to technologies that can lead on to further changes in productivity, and when minority groups would be harmed by very low ‘marginal QALY’ cost ceilings.

• The techniques used to measure quality of life and value health outcomes are subject to many limitations. In some circumstances they risk discounting the lives of people living with mental or physical disabilities. There is also a danger of systematically exaggerating the opportunity costs of using products like innovative medicines and vaccines. Unlike labour intensive services, pharmaceutical products typically drop in price after the intellectual property rights awarded to incentivise further R&D spending expire. CEAs factor in ‘life cycle’ related savings.

• The NHS was established to provide equitable and appropriate care for everyone, rather than to provide an especially low cost health service. If policy makers are unduly influenced by recommendations based on narrow value measures like QALYs coupled with low cost effectiveness thresholds they will undermine community wellbeing. Wider dimensions of value, including giving hope to people living with conditions that are presently incurable and the long term socio-economic and industrial benefits that life sciences related research and product use generates, should be taken into account.

• Nations like France, Germany and the US spend 1.5-2 per cent of their GDPs on pharmaceuticals. The British figure is about 1 per cent. The UK spends 10-20 per cent less of its national income on health and social care than France, Germany, Sweden and The Netherlands. America spends twice as much of its GDP on health care than the UK.

• Reducing the cost effectiveness thresholds used by NICE to less than half their current value would put UK patient access to innovative treatments further behind that enjoyed by similarly affluent populations elsewhere in Western Europe and North America. Driving down health and social care spending to levels below those seen in other comparably wealthy nations without checks on the improper use of ‘single purchaser’ market powers could damage British research and industrial investment in the post-Brexit environment.

• There is no ‘scientific’ way of setting cost effectiveness thresholds. The reason why the WHO recommends that QALY-like Disability Adjusted Life Years (DALYs) should be valued at three times per capita GDP as opposed to the one-to-one ratio presently used by NICE may relate to the fact that the WHO acts as a health improvement advocate rather than a rationing agency. Economists who advocate very low NHS cost effectiveness thresholds risk perpetuating under-investment damaging the wider economy. Such deficits may be difficult to prove until after substantive harm has been caused.

• With its relatively strong research base, Britain stands to lose from driving down the prices paid for innovative medicines and vaccines in the affluent world. But defending the value of research based products requires meeting the needs of people in poorer communities. Policy makers should support low cost access to essential medicines in such settings, without unethically seeking to cut the prices for innovative products paid by the NHS in order to avoid making proportionate contributions to global pharmaceutical research, development and supply costs.


• England and the other UK nations should seek to achieve flexible and humane approaches to valuing and supplying innovative treatments which promote equity and foster high levels of public and patient confidence without generating unaffordable costs. National and international examples of good practice, including recognised strengths of the PPRS and the achievements of countries like France and Sweden, should be built on in order to combine greater freedom for ‘case by case’ decision making on the cost effectiveness of medicines offered for NHS use while assuring overall health care system affordability. Pharmaceutical assessment methods should themselves be as cost effective as possible.

• Future policies ought to enable seriously ill NHS patients to have timely and assured access to treatments such as anti-cancer and rare disease medicines in ways consistent with taxpayers’ interests in the quality and affordability of health care and ongoing industrial investment in R&D and manufacturing. The UK’s pharmaceutical sector record has to date been strong. It could become stronger through linking greater sensitivity to health service user and wider community needs with more emphasis on constructive partnership working between public and private sector organisations.

• Economists make simplified models of the world in order to aid the pursuit of greater wellbeing. Rationally used, measures such as QALYs and ICERs support the identification of efficient and effective choices. But if health economists, or others using their findings in areas like the value of reducing pain or extending life, come to dogmatically believe that their work provides an absolute guide to achieving optimal patterns of health care funding and activity they may endanger the health, wealth and wellbeing of people in the communities they seek to serve. Politicians, health professionals and other stakeholders should actively avoid such risks.


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